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Sunday, November 10, 2013

SMNE Calls for Strong Measures from the International Community, Donors and International Investors in Confronting Official Corruption in Ethiopia

November 9, 2013

Press Release Washington, DC, November 4, 2013

The Government of Ethiopia is broadly soliciting for development aid, foreign-based business partnerships and financial investors; yet, the unpopular ruling party has been accused of abuse of state power, misuse of donor funds, widespread party-run business monopolies, illicit financial practices and endemic corruption. It is time to demand accountability from all involved and concerned.

The Solidarity Movement for a New Ethiopia (SMNE)is a non-political and non-violent social justice movement of diverse people that advocates for freedom, justice, good governance and upholding the civil, human and economic rights of the people of Ethiopia, without regard to ethnicity, religion, political affiliation or other differences.The SMNE believes a more open, transparent and competitive market economy, supported by viable institutions and reasonable protections, which provides equal opportunity, will result in greater prosperity to the people rather than keeping it in the hands of a few political elites.

We strongly contend that Ethiopia will not emerge as a dependable global economic partner until the corrupt and illegal practices of the current one-party regime’s monopoly end and existing blocks of entry to non-party members are lifted. We also believe the global business community as well as donors to Ethiopia can contribute by coming alongside Ethiopians in the push for meaningful reforms. Such reforms would include greater transparency and an opening up of economic space to the private sector, without which growth and development—beyond the benefit of the ruling party’s affiliates—will never be realized.

In light of this, the SMNE urges the international community, donor nations, charitable organizations, and the international financial and business community to make demands onthe Government of Ethiopia (GOE) for compliance with national and international laws. This must include holding companies affiliated or owned by members of the ruling party, including those businesses associated with their business conglomerate,Endowment Fund for the Rehabilitation of Tigray, (EFFORT), accountable. Additionally, measures should also strongly support restoring autonomy to independent institutions, the judiciary, and the Media and upholding thehuman and economic rights of the people.

Until these measures are taken, the SMNE urges these stakeholders in the international community to withhold investments, development financing and other forms of partnering with the regime and its cronies.

The ruling TPLF/EPRDF party has misused its state power and expenditures of foreign aid to corner the market through its companies and affiliates in all sectors of the economy. Illegal expropriation of land and public resources, corruption, illicit capital leakage and dubious allegiances riddle these secretive deals, putting prospective partners at high risk for future liability or other uncertain consequences.

Likewise, the international community and investors have largely ignored or, knowingly or unknowingly, become complicit with the pervasive corrupt practices of many of the 100’s of companies owned and operated by theTigrayan Peoples’ Liberation Front (TPLF) that dominates the ruling coalition government of the Ethiopian Peoples’ Democratic Republic Front (EPDRF).“Companies under the Endowment Fund for the Rehabilitation of Tigray, known as EFFORT, alone account for roughly half of the country’s modern economy”, according to an IPS report titled “Examining the Depths of Ethiopia’s Corruption.” The wife of the late Prime Minister, Meles Zenawi, headed up the organization until only recently.

Bloomberg News, in its October 27, 2009 edition, reported “Guna Trading House Plc,owned by Ethiopia’s ruling party, said it plans to become one of the nation’s biggest coffee exporters, raising concern among industry observers that private industry may get crowded out.

The report quotes the late prime minister regarding the company’s plans to expand in the industry. ‘We are intending to export to Europe, the U.S. and China,’ he said. Guna is among at least four other companies owned by the state or Prime MinisterMeles Zenawi’s ruling party.”

Coffee Plantation Development Enterprise, Dinsho Trading P.L.C and Ambasel Trading House P.L.C. are among coffee exporters under the ownership of the ruling party that has been able to obtain favored treatment from public agencies and enterprises due to the regime’s control of these government agencies that should otherwise be holding them accountable. Companies that fall out of line can suddenly fall under the scrutiny of these agencies. As a result, those associated with the ruling party are able to dominate key industries, including the export of commodities. See some of the more visiblecompanies and less visible, like Wogagen Bank, Sheba Tannery P.L.C., Ambasel Trading House P.L.C., and many more companies owned by the ruling party.

Another company within EFFORT’s group is Almeda Textile Factory. According to the company, it is the biggest textile factory in Ethiopia. It is one of the major exporters of textile products to the US market. The company has had help in achieving this position through assistance from US government agencies, made available through the Africa Growth and Opportunity Act (AGOA). Additionally, according to the United States Agency for International Development‘s News, they report giving technical assistance to Almeda Textile Factory through the USAID East Africa Competitiveness and Trade Expansion Program (COMPETE). They also sponsored the company in an exhibit at the MAGIC Apparel Trade Show in August 2009.

Essentially, the US government agency admittedly supported this Ethiopian ruling party-owned company in its exports into the US market, also allowing Almeda AGOA’s duty free import privilege, something that was intended for independent businesses. This is in direct violation of US anti-corruption laws.

Another ruling party-owned company, Addis Pharmaceutical Factory, which dominates the local market, claims to be the largest pharmaceutical manufacturing plant in Ethiopia. According to the company, it manufactures “analgesics, anti-acids, antibiotics, anti-malarias, anti-asthmatics, amoebicides, anthelmenics, cough syrups and vitamin preparations.”Addis Pharmaceutical allegedly benefits from the expenditure of health funding from development agencies.

The international community, including development agencies, charitable organizations and investors, often have ignored the implication of associating with the ruling party’s owned companies. This is contrary to the public interest and is in violation of international laws and regulations against corruption.

According to the Foundation, “Ethiopia is an important focus country for the foundation, which currently provides more than USD $265 million in funding to partner organizations that are operating health and development programs across the nation.”

In Ethiopia, ruling party controlled organizations and businesses are nearly the only partners possible, creating an oligarchy similar to what has happened in Russia and other countries in Africa where totalitarian governments and their cronies pillage the economy and resources to their own advantage and without regard to the people.

What appears to be negligence and a lack of doing due diligence on the part of the foreign aid community and investors, including the UN Millennium Development Goal (MDG), the Bill and Melinda Gates Foundation, USAID, among many other agencies and investors, unfortunately contributes to making it possible for the ruling party and its affiliated companiesto involve themselves in all kinds of shadow businesses while eroding the prospects for viable independent businesses to emerge and survive.

As a result, in the last decade the number of parallel shadow business enterprises associated with theruling partyand affiliateshave mushroomed in every sector of the economy while at the same time the international community has poured in billions of dollars in development aid and investment without appearing to question the ruling party’s extensive involvement in business and trade.

Global Advice Network on its Business Anti-Corruption portal concludes in the profile on Ethiopia: “The [Ethiopian] government strategy is clearly top-down, dominating anti-corruption institutions, the anti-corruption debate, and the formulation of anti-corruption policy. Despite the introduction of anti-corruption initiatives in previous years, including the Federal Ethics and Anti-corruption Commission (FEACC) in 2001, corruption remains widespread at many levels of government administration in the country.”

In the findings of the Bertelsmann Foundation 2012 Report , they assert: “Ethiopian society’s deeply ingrained clientelism does not foster a culture of accountability and transparency, has fostered cover-ups and non-enforcement of laws”. For example, they report: “Competition laws aimed at preventing monopolistic structures and conduct exist within some sectors, but are enforced inconsistently. A Competition Commission was established in 2006, and by the end of 2007 had reviewed some 23 cases. Although informally provided, the strongest complaints are against the government’s preferences for party-affiliated businesses; [however], only trade-related issues were investigated. The transportation sector, for example, is to a large extent in the hands of business people belonging to the para-party sector. There are a number of companies close to the government and the ruling party, which leads to a lack of transparency and [high levels of] corruption.”

A World Bank 2012 report on Ethiopia reinforces the same, saying that “high-level corruption is widespread within the construction sector, and that it is dominated by the ruling party affiliated companies.”

Reports alone cannot fully capture the enormity of the ruling party’s affiliated companies’ extensive involvement in all sectors of the economy due to the ruling party’s control of:

Licensing and regulating of charitable organizations, which includes: The Ethiopian Charities & Civil Societies Agency (ECCA) and legislations severely limiting the kinds of activities—civic engagement important to healthy societies—that organizations are allowed to carry out if they receive more than 10% of their financing through foreign sources, rather than through government funding under the Charities and Societies Proclamation; resulting in the ruling regime’s operation of hundreds of charitable organizations, including the Tigray Development Association (TDA);

The UNDP commissioned Global Financial Integrity Report: ‘Illicit Financial Flows from the Least Developed Countries: 1990-2008’, revealed that “approximatelyUS$197 billion flowed out of the 48 poorest developing countries and into mainly developed countries, on a net basis over the period 1990-2008. Trade mispricing—when imports are overpriced and exports underpriced on custom documents—accounts for 65 percent of illicit financial flows.”

The report ranked Ethiopia among the top ten worst countries out of the forty-eight.As a recipient of the largest development aid in Sub-Sahara Africa, the international community has the obligation to hold the GOE and the ruling party owned business conglomerate and facilitating organization primarily responsible and accountable.

In light of these concerns, the SMNE calls on the international community, donor countries and organizations and financial institutions, investors or business partners, either prospective or established, to not ignore the overwhelming evidences of endemic corruption but to take strong measures to ameliorate the problem to the best of their ability through exposure, denial of services, investigations, criminal proceedings and remedial actions. Some of these actions should include:

Demand that the ruling party disclose and dissolve all its business holdings built on public resources and foreign aid

Demand that the ruling party affiliated charitable organizations’ including EFFORT Group, disclose their financial holdings to the public and cease operating charitable organizations

Call for an independent investigation of the regime’s business and charitable activities

Call for the immediate restoration of the independent Media, including allowing the international Media to operate freely in the country with full access to the public records

Demand public disclosure of all records on foreign investment, including land contracts for the purpose of commercial farming as well as real-estate, mining and manufacturing

The SMNE urges the international community, donor nations and organizations, Ethiopian political parties, civic and religious organizations and the Media, at home and abroad, to pressure the international community to:

Not provide a blank check and diplomatic cover for the Government, the ruling party and its affiliated companies

Require meaningful conditions be met as part of receiving development aid and diplomatic support

Closely monitor the misuse of military and security assistance they or others have provided that has helped the ruling party gain control of the ways and means of the economy

Open an investigation on crimes of corruption and money laundering on the part of the ruling party’s affiliated companies, officials, and family members residing inside or outside of the country, in their respective jurisdictions abroad

Close any access for the ruling party affiliated companies that do business in the international markets until compliance with international and national laws are followed.

The SMNE and partners advise all concerned organizations to use established laws, agreements and protocols, where possible, to compel the ruling party to abide by international and regional conventionsandprotocols as well as to follow all applicable laws and regulations on corruption both nationally and internationally.